The latest analysis from Rightmove this morning has revealed that while the level of new properties coming up for sale is at a similar level to the long-term average, demand continues to massively exceed supply, especially in northern regions.
In previous market upturns, London has generally led the way, but the capital’s rate of price increase since pre-lockdown March 2020 is now at a virtual standstill (+0.2%) compared to double-digit price growth in areas further north.
Tim Bannister, Rightmove’s Director of Property Data comments: “Last year’s unexpected mini-boom is rolling on into 2021, with new price and market activity records again defying many predictions. Buyer affordability is increasingly stretched, but there’s obviously some elasticity left to stretch a bit more as many buyers are squeezing their way into higher price bands.
"This high demand, with both willingness and ability to pay more, has pushed the average price of property coming to market to a new all-time high of a third of a million pounds. In another twist, it is the regions of Britain further north that are leading the way, with some degree of catching up between average prices in London and the north. While the gap remains very large, with average prices in London still 2.9 times higher than those in the north, this ratio is now at its smallest since 2013.
"The pandemic has given a greater focus on the home, and in 2020 we saw a surge in southern coastal and rural areas. So far 2021 is proving to be the year of the northern mover, not only satisfying their pent-up housing needs but in doing so also narrowing some of the huge price gap with London.”
Prospective buyers are now faced with record prices for newly marketed properties in all regions and countries of Great Britain except London, with three areas seeing average rises of over 10% in the closest available year-on-year comparison. Rightmove's year-on-year comparisons compare March 2020 to May 2021, as the property market was suspended for most of April and May last year.
Wales is growing the fastest at +13.0%, followed by North West (+11.1%), and Yorkshire & the Humber (+10.5%). The average increase for all regions outside of the South of England is 9.7% (+£19,497). In contrast, London lags behind at +0.2% (+£1,547), though it must be stressed that within the capital there are widely varying local markets and market sectors, with some rising in price and others static or falling.
This strong market appears to have enough momentum to shrug off the imminent end of the stamp duty holidays in England and Wales. Buyer demand has soared throughout Great Britain (+52% in April 2021 versus April 2019), with similarly strong levels in London (+48%). But it is the north that is seeing the greater imbalance between demand and supply and this is one of the main factors driving prices to new records in all regions except the capital.
This supply shortage is particularly marked for typical family homes with three bedrooms or more, with available stock for sale on agents’ books in April down by an average of 50% on the same period in 2019. In contrast properties with two bedrooms or fewer have availability down by 24%.
Bannister adds: “There appears to be more headroom in buyers’ budgets among those looking to upsize. Family homes with three bedrooms or more are like gold dust in many areas of the country, especially in parts of the north. For example, compared to the same period in 2019 agents in the North East have 59% less available stock for sale in the ”second-stepper” sector made up predominantly of three-bedroom homes, while Scotland is 65% down in the “top of the ladder” four-bedroom or more sector.
"In contrast, London’s available stock is down 20% and 24% respectively in these sectors, so while supply is still limited it is more closely matched to demand. Another important factor driving the higher demand and quicker average time to sell in the north is that more of their sellers are intending to buy and stay local, whereas many Londoners are looking to move out. Rightmove research among those intending to sell in the next 12 months shows that an average of 84% in the north are looking to move locally, compared to only 52% in London.
"The pandemic has changed many aspects of what people want from their homes, and the pricing pendulum is swinging away from London towards the north.”
James Forrester, Managing Director of Barrows and Forrester, commented: “Asking prices continue to climb at an alarming rate and this upward pressure is being driven by a number of factors.
"Buyer demand remains extremely high and an appetite for larger homes is driving market activity. However, a lack of suitable stock to satisfy this demand is causing many to dig deep in order to offer above the odds and secure their desired purchase.
"At the same time, savvy sellers are realising that buyers are not only entering the market with a budget boosted by the stamp duty holiday, but they’re doing so amidst an air of panic with the deadline fast approaching. Therefore, many are pricing far higher than the market value of their home to take advantage of this desperation. While they will inevitably reduce this expectation during the offers stage, this additional wiggle room still enables them to secure a higher price than they may have otherwise.”
Matthew Cooper, Founder & Managing Director of Yes Homebuyers, commented: “It’s clear that sellers are attempting to cash in on the stamp duty holiday themselves by reaching new highs where unrealistic asking price expectations are concerned. In doing so they’re also crushing the hopes and dreams of many would-be first-time buyers who will now find themselves well and truly priced out of the market.
"It certainly doesn't help when this hysteria is being driven by the likes of Rightmove, who continue to pull 'record' market statistics out of their hat on a monthly basis, much like a cheap magician at a children's party.
"Those hard-pressed to reach the first rung of the housing ladder may well have the last laugh though, as an already weary market continues to overheat. When the end of the stamp duty holiday does come and causes buyer demand to evaporate, we’re likely to see property values fall at pace.”
